Thursday, January 05, 2012

Mitt Moseley Braun

We know enough about his finances and sources of incomes to know that he is the poster-boy for the Buffett Rule (the concept pushed by kabillionaire Warren Buffett and embraced by Democrats and particularly the White House, which says that the superwealthy should not pay lower tax rates than your average secretary or auto mechanic or office manager or anybody else who gets by on a salary).

As Romney likes to say, he’s unemployed. He doesn’t draw a salary. But he seems to still be making big big money off capital gains which are currently taxed at a very low rate. He doesn’t seem to have drawn a salary at any time recently. So he likely pays no payroll taxes. And that’s before you get into legal but aggressive tax-sheltering. It seems virtually impossible that Mitt Romney doesn’t pay the sort of effective tax rate that would make people’s eyes pop when compared to middle income and even relatively wealthy (by normal standards) people who pay considerably higher rates.

It's now all but obligatory that candidates for major office cough up their tax returns or face relentless, withering demands that they do so. Why? So we can get a good sense of their financial entanglements and see if there are any eyebrow-raising discrepancies between their lifestyles, their images and their incomes....It's political malpractice not to do an early data dump, before most of the voting public is fully engaged in the race (and in advance of a major holiday, if possible). That way, whatever questions might arise can seem like old news by Election Day.

Comments

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At the risk of getting into another discussion of capital gains vs. ordinary income, you do understand, don't you, that capital gains income comes from investment dollars that are at risk, right? i.e. there is a perfectly good reason why the tax rate on cap gains is lower than ordinary income given the risk/reward and the desire to incent people to invest in our economy.

To compare the tax rate that Warren Buffet's secretary pays on her salary to the tax rate that any investor, in any income class, pays on capital gains is the ultimate in apples and oranges.

Mittens will release his returns or more accurately, what he claims are his returns late on a Friday at the end of October.
This will occur after weeks of attacks on him because he won't release his returns.
That of course is assuming he's the nominee.

It really won't matter, he won't win as there will also be weeks of ads going after him for all his flip/flops. All of his Republican opponents are just giving Obama's people tons of ammo to use against him.

@Paul - Just because there is a rationale does not mean that anyone has to find it compelling. Just because that rationale obtained in the past does not mean that it continues to make sense. Just because it's legal, does not make it right.

@Garry - I can't imagine Romney, if he is the nominee, waiting until late October to release his forms. The latest he does it is in the run-up to the nomination around Labor Day, hoping it gets buried then. To refuse until late October and then release will make him look weak and flip-floppy, and will guarantee close coverage, which none of these guys really want.

The election will come down to this regardless of who the Republican candidate is: those who want more government intrusion/entitlements in their lives will vote Democratic, those who want less will vote Republican.

I hope the Republican wins, but I am skeptical that Congress will have the cajones to cut federal spending enough to change the disastrous trajectory we are currently on which will have us looking like Greece very soon.

That's pretty funny, Paul, since the Republican candidates are all the ones advocating more government intrusion into citizen's lives. Human rights, like the right to marry and determine your own medical care, or not to be polluted by unregulated industry, etc, etc.

The comment about about capital gains rates reflects no understanding of the fact that investing in common stock involves risk, a concept unknown to liberals. Many of us who used our own post-tax dollars to buy shares in Kodak that are about to become worthless are more familiar with this concept. No, any deduction we can declare will not cover the wipeout of our stake. Yes, we chose to invest, but we suffer the loss when it fails but are taxed nicely when it succeeds. The only risk liberals like involves operations like Solyndra, for which, when it succeeds, the deal favors the insiders subsidized by Obama's "green" investment, and when it fails, the losers are taxpayers, who were given no choice about investing in it.

By the way, Warren Buffett's company fights at every turn to prevent the government to get one more penny than what it is owed. His cry of "tax me more" is BS.

Adding to Quotidian's and Paul's comments (which are spot on), I'd also like to point out that capital gains are not indexed for inflation...which means the stock that I bought ten years ago for $20 and sold yesterday for $22 was actually a LOSING transaction--but the government will demand I pay taxes on the $2 "profit."

ZORN REPLY -- And we'd all have a good cry on your behalf, except that's now how investment income works for the vast percentage of well-to-do folks who live off it. They have a diverse portfolio that, in the case of Romney, cranks out eye-popping returns that serve in all ways just like a very big, fat paycheck. It's a sweet, sweet deal...it helps the rich get richer. You can pretend all you want that it's not and that working stiffs will nod their heads at this "yes, but they're not indexed for inflation" sophistry and this pitiful "they are taking risks with their money" blather.
Romney knows it won't fly. I guess you don't.

Denis, you have just revealed your ignorance. As I explicitly said, I don't want you to feel sorry for me. I just don't think the taxpayers should pay for an equally stupid investment in failing Solyndra, when I have to accept the consequences of my own choice to take a chance on Kodak and would also have to pay a tax if my bet paid off. Every citizen in the United States lost about $1.50 on Obama's stupid investment in Solyndra, which was controlled by contributors to his campaign. The Kodak losses are mostly confined to shareholders and creditors who were willingly in and put their ass on the line. And at least Kodak is still employing people. Solyndra is just an empty building that put a lot of money into the pockets of the president's buddies.

Do people who make their from capital gains mistakenly believe that there is somehow more income security in earning a paycheck?

"But I could make bad choices on Wall Street that result in me losing some money and part of my income!" Well, yeah... and many Americans are subject to some Wall Street magnate making choices that result in them losing their jobs and ALL of their incomes.*

"They have a diverse portfolio that, in the case of Romney, cranks out eye-popping returns that serve in all ways just like a very big, fat paycheck. It's a sweet, sweet deal...it helps the rich get richer."

EZ, you sound like a college student here. If it is such a slam dunk to take a pile of money and make a diverse portfolio to get eye-popping returns, how come so many mutual funds, run by very smart guys, have been having negative or piddling returns? Does Romney have some magical power? And to just dismiss the notion of risk, or the notion of inflation in relation to the the rate of taxation is simply to dodge the argument, not to refute it.

2. Did Clinton, Obama, McCain release their tax returns? Did you liberals pressure them to do so?

3. So apparently if I own stock and collect dividends I don't have a clue what the "regular folks" in the bottom 99% are going through. And I'm also a greedy SOB. What am I supposed to do with my money? Put it in a CD or a bank that is paying 0.25% interest?

4. Do you really believe that most CEO secretaries are paying higher tax rates than the CEOs? Before Buffet made the outrageous claim, no one here, not even the liberals, would have believed that.

5. I don't think Obama understands what the "poor people" are going through right now any more than Romney. All we've seen him do his either hideout in the White House or take his family to Hawaii, New York or a thousand other places that most "poor people" could never go.

6. The class warfare that's going to happen on this campaign and these boards is sickening.

If Warren Buffet believes that he's being taxed too little, he's entirely free to write out a check, in whatever amount he feels appropriate, to the United States Treasury or the Bureau of the Public Debt and send it in. They will gladly accept it. If he's done so, it's not made the news. He should put his money where his mouth is; if he doesn't, he's just a hypocrite.

"ZORN REPLY -- And we'd all have a good cry on your behalf, except that's now how investment income works for the vast percentage of well-to-do folks who live off it."

EZ - it is not just "well to do people" who invest in the stock market or the bond market. Virtually anyone with a 401K or IRA or investment account at Fidelity or Vanguard or Schwab is an investor.

Every American should be saving and investing for retirement - no matter their income level. And they should not be just putting it into a savings account at the bank or they will never outpace inflation.

The perception that only wealthy people save and invest is part of what's wrong with our economy. Your comment seems to reflect this sentiment. Too many people think the government is going to pay for their retirement. We all are responsible for funding our own retirement - not the government.

ZORN REPLY -- I didn't mean to suggest that ONLY well-to-do folks live off investments, only that this bleating about how risky it is and that's why the super rich should only pay reduced capital-gains tax rates on what is, for every real purpose, income, is tone deaf.
The simple question is this: Why, when my check comes in the mail from an employer for whom I have done actual work, do I pay far more taxes on it than the person who gets the exact same amount in the mail from an investment house for whom he has done no actual work?
Both function as "paychecks."

I'd add to that, Paul, that anyone who expects a pension is, however indirectly, an investor. The money to pay the pension is not stuffed in a mattress somewhere - it's invested. One of the problems with public pensions in Illinois, aside from our elected representatives' neglect of them, is that investment returns have not kept up with the assumptions used to determine funding levels. That money is typically in the stock market; when you hear about "institutional investors," many of those are pension funds.

"The simple question is this: Why, when my check comes in the mail from an employer for whom I have done actual work, do I pay far more taxes on it than the person who gets the exact same amount in the mail from an investment house for whom he has done no actual work? Both function as "paychecks."

Whether or not it functions as a paycheck isn't the issue. The question is, do we want our tax code to incent and reward investment in the economy by setting cap gains rates low? It's a policy question and your answer above says you don't think that tax code should reward investment. I disagree.

ZORN REPLY -- Is there data that supports the idea that people would not invest or would invest less or differently without the cap gains lower rate? Your point is reminding me of the case made by those who gripe that the rich would simply stop working if you raised their taxes over, say, 50 percent, in an "oh, what's the use?" gesture. I have never believed that. If I earn an extra million dollars and the state takes half, am I -- is any reasonable person-- going to curse and say "it just wasn't worth it for 500 grand, though it would have been worth it for 650 grand."
Similarly, what would a Mitt Romney DO with his money if he felt paying standard income tax on his investment returns was simply too, too onerous? Stuff it in a mattress? Put it in a bank (which would then invest it?)

"Why, when my check comes in the mail from an employer for whom I have done actual work, do I pay far more taxes on it than the person who gets the exact same amount in the mail from an investment house for whom he has done no actual work?
Both function as "paychecks.""

EZ: I am kind of shocked that you really think this. It's kind of a basic principle of capitalism and economic behavior that if you take away the rewards people gain by putting their money at risk at the same rate as you take on no risk, no one in their right mind would put their money at risk. There is a reason that bank interest is taxed as regular income: bank interest falls in your category of someone getting money for doing "no actual work." If I take a day of my work pay and buy stock with it, I am doing so with the risk the stock will go to zero (see Kodak, General Motors, etc) and I lose everything, save a tax deduction. But you think if I guessed right and I made a profit selling that stock you think I should be taxed like it was wage income? You really don't believe in the risk premium? Have you ever thought about how the bond market works?

MrJM - I will paraphrase my earlier comment to save you the trouble of scrolling up:

It is not just "titans" who invest in the stock market or the bond market. Virtually anyone with a 401K or IRA or investment account at Fidelity or Vanguard or Schwab is an investor and subject to the same capital gains tax treatment.

The perception that only wealthy people save and invest is part of what's wrong with our economy. We all are responsible for funding our own retirement - not the government.

--In other words MrJM, unless you have all your savings in the bank or a mattress, I suspect you too have capital gains income. Lots of people do and I suspect you know that but are being disingenuous.

"ZORN REPLY -- Is there data that supports the idea that people would not invest or would invest less or differently without the cap gains lower rate?"

This is one of the most basic principles of economics and, like quotidian, I'm shocked that you question it. If you raise the price (or tax) on something, people will buy less of it and vice versa. Is that really up for debate?

Investors make decisions based upon the expected return on investment and the tax rate is certainly one of the components.

Paul: "Virtually anyone with a 401K or IRA ... account at Fidelity or Vanguard or Schwab is an investor and subject to the same capital gains tax treatment."

[NOTE: deleted "or investment", as this relates to 401k and IRA acounts]

You do realize that this is absolutely, positively wrong, and such advice would constitute malpractice if you were a CPA or tax attorney, right?

401k and IRA accounts compound tax free until withdrawal, and then are subject to OI rates NOT cap gains rates. The bargain there is that (1) interest and dividend income (and fund trading cap gains) are not taxed when accrued and (2) the assumption is that your retirement income will put you in a lower tax bracket than when you were working.

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Contributing editor Jessica Reynolds is a 2012 graduate of Loyola University Chicago and is the coordinator of the Tribune's editorial board. She can be reached at jreynolds at tribune.com.